This is old content! The Research Blog has been retired. For the new stuff, visit 
From the Archives: WOM Exerts Strong Influence Over Consumers' Decisions
Word of mouth impacts the decision making process, so long as word of mouth recipients are allowed to consult with the person passing them the information, according to the December 2001 article "Word of Mouth Learning," by Abhijit Banerjee, MIT, Department of Economics, and Drew Fudenberg, Harvard University, Department of Economics. In the study, successive generations of a single word of mouth chain made the same choice between two alternatives, provided that the information they received was unbiased, that two other consumers were consulted, and that simple satisfaction information was available.
`
Banergee and Fudenberg asserted that, even when the only source of information present is unvalidated word of mouth communication, simple assessment by the word of mouth recipient can help them to determine whether to allow it to influence their decision. Even though the nature of word of mouth communication assumes that the WOM recipient is unable to observe the information's lineage, the authors contend that word of mouth is able, in many cases, to successfully guide decisions.